Learning lessons, purchased this duplex to 1031 in five years.

[James Bailey]

Investment Info:

Small multi-family (2-4 units) fix & flip investment.

Purchase price: $615,000

A bread and butter 2/1 1600 sq ft duplex.

Side 1 is recently updated with appliances, LVP, and led lighting. Good tenants that paid all through covid.

Side 2 will need a heavy renovation when the current tenant (10 years) moves out. Unfortunately, this Tennant is extremely under market rent, approximately 800 below market rents. Due to local laws, the best I can do is 9% raise a year. Once the day comes, Side 2 will be tastefully renovated, exterior painted, and lovingly put on the market for a 1031 exchange into a fourplex out of state.

The reason being is California is just not a good state to have real estate in unless you have an absolute home run.

What made you interested in investing in this type of deal?

This duplex was part of a bundled deal. otherwise, I wouldn't have really gone for it.

How did you find this deal and how did you negotiate it?

An off-market deal. The seller had two properties bundled together. One was a home run with value added, and this unit is just a plain jane.

How did you finance this deal?

25% down. 6.5% APR 30-year fixed 4-year prepayment.

How did you add value to the deal?

The plan will be to renovate once side 2 moves out and refresh the exterior

What was the outcome?

In five years, I'll have $29,469 in debt paydown from tenants.

Assuming a super conservative 1% appreciation will put the property at $646,371

$214,590 in equity at time of sale at $646,371 in 2027.

[James Bailey]

Quote from @Alex Olson:

@James Bailey what market out of state would you be looking to exchange in to? I can help you understand and evaluate the KC market. 

Hi Alex,

that would be awesome thank you! I’m leaning towards Indiana, Tennessee, or Florida.